Monday, June 22, 2015

Something doesn't add up.

I have been pretty distracted the past couple of weeks, so I haven't been following the business news as closely as I normally do. Having said that, when the existing housing numbers came out this morning I both rolled my eyes, and felt hope simultaneously. Oh....yes....I did.

I rolled my eyes because when people start congratulating themselves about numbers they compare to 2009, I think their numbers are bullshit. 2009 was a very dark year on all levels. Especially for existing home sales. I was in the middle of all that and I remember vividly what happened in 2009. Never mind this number is only slightly better than the last peak in 2013. So technically - the numbers are slightly better than 2013. But better is better. Right? Maybe I should shut up and quit complaining.

However..... I've been watching mortgage apps really closely because interest rates have been rising last past month or so. I've been waiting to see if the market can absorb the higher rates. Mortgage apps indicate - probably not. The above chart is what happens when interest rates are solidly in the 4% range. But somehow the chart above produces the chart below. And that doesn't make sense to me. And I follow this stuff more closely than most.

Of course, the difference must be being made up in the new housing segment, right? New homes are way more expensive, so higher rates must be affecting that side more making up the difference. But new home sales are only slightly down. Obviously mortgage apps are not sales, only the attempt at trying to buy. Still, I don't understand how apps can be down for so long, yet sales are apparently - up.

Normally I try to accept what the data tells me whether I agree with it or not - but this makes no sense to me at all. Either a lot of people are getting mortgages without having to fill out an app, or they are massaging this data. They either have to hike this year, or wait until after the election. And I think they are going to hike this year. If they could keep the banks under control - I actually think they could hike without much problem. But the banks can raise rates any time they want to. They don't have to wait for the Fed. And when rates get into the 4% range - the result is not good. So it's been especially fascinating that the numbers being reported are so healthy considering 4% is a significant pain point.